On Friday, Goldman Sachs (NYSE:GS) reinforced its Conviction Buy rating on Citigroup Inc. (NYSE:C) stock with an unchanged price target of $69.00, following the bank's first-quarter earnings report.
Citigroup exceeded expectations, posting a Q1 earnings per share (EPS) of $1.58, which surpassed the consensus estimates of $1.04 and $1.14 from Goldman Sachs and Visible Alpha, respectively. When excluding various one-off costs and adjustments, the core EPS reached $1.87, notably higher than Goldman Sachs's own estimate of $1.52.
Citigroup's financial results for the first quarter of 2024 were bolstered by a combination of higher fee revenue than anticipated and lower expenses and provisions compared to expectations.
The bank's pre-provision operating profit stood at $7.4 billion, up 14% from consensus, driven by an increase in capital markets and services revenue and contained expenses, although partially offset by a dip in net interest income (NII).
The company's Common Equity Tier 1 (CET1) ratio saw a slight increase of 10 basis points from the previous quarter, reaching 13.5%, which was in line with Goldman Sachs's projection. Citigroup's performance indicates a solid start to the year, which suggests that the bank's full-year revenue guidance of $80-81 billion is within reach, considering the current revenue run rate.
In terms of guidance, Citigroup reaffirmed its full-year projections, aligning with analyst expectations. The bank's revenue guidance matches the Street's forecast of $80.2 billion, while the outlook for NII excluding markets is expected to decline modestly, in contrast to the Street's prediction of a flat trend.
Citigroup's anticipated core expenses, excluding the FDIC special assessment, are projected to be between $53.5 billion and $53.8 billion, closely aligned with the consensus estimate of $53.7 billion.
Looking ahead, Goldman Sachs anticipates further details on several aspects of Citigroup's operations, including the management of deposit flows, loan growth in the context of a higher-for-longer interest rate environment, the impact of the ongoing reorganization on the bank’s expense trajectory for the second half of the year, and the potential for capital returns amid possible significant changes to the Basel III endgame (B3E) proposed rules.
InvestingPro Insights
As Citigroup Inc. (NYSE:C) navigates through the fiscal year, current InvestingPro data provides a snapshot of the bank's financial health and market performance. With a market capitalization of $118.25 billion and a P/E ratio that has adjusted to 13.89 in the last twelve months as of Q4 2023, Citigroup demonstrates a significant presence in the financial sector. The company has shown resilience with a dividend yield of 3.43% and has maintained dividend payments for an impressive 14 consecutive years, which could be an attractive point for income-focused investors.
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